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Lord Heseltine said: ‘This is about backing and investing in growing companies. A sovereign fund would create long-term, stable wealth.

‘The problem for the small, growing family business is that they need what is called “patient capital”. That is capital that will stay with them long-term.

‘Our present system very much relies on support from City institutions whose agenda is to make a quicker return or to float businesses on the stock exchange.

‘This is about creating a situation where there is someone who will invest in your business without then forcing you to sell,’ said the 84-year-old who co-founded the Haymarket publishing company.

Lord Heseltine said such funds are already used by successful economies such as Norway – which set up a sovereign fund to invest its North Sea oil wealth – and by the US

He said he regretted not pursuing the idea during his time in government. ‘I wish we’d done it in the 1980s when we had the huge resources of North Sea oil.

‘We should have put more of that into the support of long-term investment activity.’

He said a similar investment proposition could be created using the assets of council pension funds. His wide-ranging report also included issues such as tackling Britain’s ailing education system and supporting winning firms and sectors such as pharmaceuticals.

He said the Government ‘must be in the driving seat’, adding: ‘It is unrealistic to think that the private sector can lead the process.

‘Private firms must be invaluable partners but the power of Government and the scale of public resources is so pervasive that the leadership of the public sector has to be recognised.’

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